Option Investor
Newsletter

Daily Newsletter, Thursday, 07/19/2001

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                 Thursday 07-19-2001
Copyright 2001, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/9640_1.asp

Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
         7-19-2001        High      Low     Volume Advance/Decline
DJIA    10597.13 + 40.17 10679.12 10523.92 1.34 bln   1772/1266	
NASDAQ   2046.35 + 30.42  2079.33  2027.11 1.97 bln   2133/1511
S&P 100   626.44 +  4.02   632.23   622.11   totals   3905/2777
S&P 500  1214.06 +  7.31  1225.04  1205.80
RUS 2000  487.64 +  3.92   491.13   483.62
DJ TRANS 2981.28 +  6.62  2998.12  2965.32
VIX        26.47 +   .16    26.50    25.06
Put/Call Ratio      0.76
******************************************************************

Microsoft - Just Kidding!

Dell announced this morning that their earnings would meet their
previous guidance of sixteen cents and revenue of about $7.6 billion.
The surprising "pre-announcement" caught investors off guard and
the markets soared. Instead of speculating on a possible warning
from Dell of missed earnings due to the weak economy investors
were surprised with a positive event. Nokia also made some positive
statements and lifted the telecom sector. What to do? Buy something
appeared to be the answer and euphoria reined for several hours.
Then reality crept back into the picture and the gains evaporated.







The Dow hit 10679 or +122 just shortly after the open but moved
back down to negative territory shortly before the close. Over
150 points erased from the high on no bad news. The bad news
was the earnings after the close on Wednesday. IBM, EMC, AOL
and SEBL but all that was ignored at the open. Traders still
want to buy ANY good news regardless of the bad news still on
the way.

After the close on Thursday there was a mix of good and bad news
but the bad is what investors will be fighting on Friday morning.
Microsoft announced earnings that beat the street by a penny but
then cancelled their previous "sales and revenue are better than
we anticipated" statement which rallied the markets recently and
replaced it with an earnings warning going forward. Saying they
only made a penny this quarter after taking a -$2.6 billion
charge for investment losses their tone had changed significantly.
Citing the "continued softening demand for personal computers"
they expect profits in the next quarter to be more than a nickel
below analyst estimates. So did they have their fingers crossed
when they said sales and revenues were exceeding estimates a week
ago? Did the software market implode in the last five days and
catch them by surprise? It is not nice to fool Mother Nature or
lie to investors and MSFT may suffer from this on Friday. MSFT
dropped to a low of $69.17 in after hours before firming just
below $70.

PMCS also announced earnings after the close and then warned
that the current quarter would be below estimates. They said
that customers were being "irrationally conservative" but that
inventory was burning off at an acceptable rate. PMCS dropped
-5 in after hours to $26.

SUNW announced earnings that beat the street by a penny but
said that sales in Europe were down by -$200 million. They
would not issue any guidance going forward due to the highly
unpredictable economic environment. They did say that earnings
would be at least breakeven. That would be a four cent drop
from this quarter and about a -$600 million revenue shortfall
from current estimates.

The implosion in the PC sector also hit Gateway which announced
a six cent loss instead of the breakeven analysts expected. They
also announced a massive restructuring to reduce costs and said
they expected to do no better than breakeven the rest of 2001.
This was based on the economic conditions remaining the same
and Microsoft said this was not likely. They said worldwide PC
sales had declined to low single digit growth and was still
dropping. This does not bode well for any of the PC companies.
Gateway dropped almost $2 to $13 in after hours trading.

All was not as grim as the computer/software results would have
led you to believe. EBAY announced earnings that beat the street
on the revenue side and had the audacity to do the unthinkable.
They raised earnings guidance a couple pennies above expectations
for the coming quarters. Must be all those excess computers
being sold at auction that is holding them up. They now have
over 34 million registered users. It is a good site. I buy
something on Ebay almost every week. Just last week I bought
a 1987 Honda Trials motorcycle. This is one of the few business
models that works really well on the Internet. Putting unrelated
buyers and sellers together electronically may not be as sexy as
some other business models but it works well enough for almost
35 million users. Amazon has yet to turn a profit and may
continue to struggle long after EBAY doubles their existing
business. Good job Meg!

Another company that got brushed under the warning rug with the
rest of the news releases was Broadcom. They reported a loss of
sixteen cents but said they saw signs of improving conditions.
BRCM was upgraded by Goldman Sachs and they gained +3.45 on
the day but lost over $2 in after hours once the flood of
negative news hit the wires.

So it is official! Dell and Broadcom remain isolated pockets
of optimism while the rest of the companies in the
computer/software/chip sectors melt into the summer asphalt.
At least that is the way it seems and it sounds better than
saying the CEOs of those companies must be smoking a contraband
substance that produces hallucinogenic results. Either way this
week of 100 point swings will be one that traders will be glad
to see come to an end.

The Dow settled right back on upper resistance at 10600 on
Thursday but will open up substantially below that if the
futures hold their current position overnight. The Nasdaq
closed at 2046 and dead in the middle of its recent 2000-2100
trading range. It too will open significantly lower, possibly
under 2000, if the current Nasdaq futures hold at -48.

Many earnings announcements have left smoking craters in their
wake while the vast majority of companies have beaten their
lowered expectations. 61% of the 215 S&P companies that have
announced, beat their estimates. Only 12% have missed the
posted numbers. This scenario fits the suggestion I made last
week that many companies had increased the severity of their
warnings to enable them to beat the lowered numbers and avoid
being taken to the wood shed and beaten on earnings day. Are
we investors so stupid as to not see through this ploy? I
doubt it and the drop on the Dow from the triple digit gains
was selling based on this reality. Odds are also good that
some of the big boys knew in advance that MSFT was going to
spoil the party but that of course is simply speculation.

On Friday we will be looking for strength in the afternoon.
There is likely to be a dip, possibly a serious dip, but it
is the reaction to the dip that we are looking to for direction.
If investors decide it can't get any worse then there may be
some bargain hunting. If they are tired of trying to pick a
bottom and simply decide to wait for calmer times then the
dip may not be followed by a bounce. Remember, I said 2100-2140
was the "wait and see zone" several days ago. I hope you waited!
Aggressive traders could buy any bounce from below 2000 on
Friday but be ready to go flat should that level fail again.
Cisco CEO John Chambers was cautiously optimistic about
the future in a late interview and should his comments be
construed as calling a bottom the markets "could" react to
those comments. The futures improved several points after his
comments but there is a lot of darkness left before morning.

Enter passively, exit aggressively!

Jim Brown
Editor


*************************ADVERTISEMENT*********************
Why put all your risk into one stock when you can play the
index instead?

Learn how to invest in the OEX, QQQ, and SPX.  Get intraday
market updates, plays, education and daily commentaries by
those who know.

Sign up for a two week free trial and see for yourself at
IndexSkybox.com:
http://www.IndexSkybox.com
************************************************************


****************
MARKET SENTIMENT
****************

At Least Somebody is Confident
By Jeffrey Canavan

The Conference Board's Measure of Business Confidence, which
tracks CEOs' confidence in the economy, climbed 7 points last
quarter to a reading of 52.  Readings above 50 reflect a positive
outlook.

Chief executives were a little less upbeat about their own
industries. 22% felt that conditions have improved from last
quarter, and only 60% of CEOs expect profit increases over the
next 12 months, down 11% from last year.  The service sector was
the most optimistic, 72% expect profit increases, and the non-
durable goods sector was the most pessimistic, with only 44%
expecting profits to rise.

Market participants were confident for most of the day, but that
confidence wavered slightly towards the end of the day.  They
were able to regroup, and close the major indices higher.  Not
much, but higher.

That confidence will be put to the test tomorrow after Microsoft
guided revenues lower for next quarter.  Good news from eBay and
Sun might help to minimize the damage of poor news from Gateway
and Nortel.   Based on after market trading in the Nasdaq-100
(AMEX:QQQ), down $1, we should be in for a lower opening.

But the markets have been languorous lately. After an initial
sell off, bears may very well take their profits by lunch to get
an early jump on beach traffic, leaving the markets free to drift
higher.  At least that's been the pattern this week; wait for an
extreme to be set in the first hour, and then fade it.  Options
expiration tomorrow may put a dent in that pattern.

===

Market Volatility
VIX   26.47
VXN   54.59

===

          Put/Call Ratio  Call Volume   Put Volume
Total           .76        935,680       711,023
Equity Only     .68        769,448       523,743
OEX            1.04         41,211        42,779
QQQ             .59         62,473        36,562

===

Bullish Percent Data

           Current   Change   Status
NYSE          36       -      Bear Confirmed
NASDAQ-100    26       -      Bear Confirmed
DOW           30       -      Bear Confirmed
S&P 500       50       -      Bear Alert

Readings above 70 are considered overbought, and readings below
30 are considered oversold.

Bull Confirmed  - Aggressively long
Bull Alert      - Cautiously long
Bull Correction - pause or pullback in upward trend
Bear Alert      - Take defensive action if long
Bear Confirmed  - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend

===

10-Day Arms Index  1.11

Extreme readings above 1.5 are bullish, and readings below .85
are bearish.  These signals don't occur often and tend be early,
but when the do, they can signal significant market turning
points.

===

        Advancers     Decliners
NYSE      1687           1334
NASDAQ    2036           1561

        New Highs      New Lows
NYSE      143             36
NASDAQ    135             72

===

Advisory Sentiment

Bullish  Bearish  Correction   Net
  51%     25.0%      24.0%    26.0%

A bearish reading of 25% to 30%, combined with a bullish reading
greater than 55% is typically considered bearish by contrairians.
A net percentage greater than 30% is also viewed as bearish.

===

Commitments Of Traders Report: 07/03/01
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the
Chicago Mercantile Exchange and Chicago Board of Trade.

Small specs are the general trading public with commercials being
financial institutions. Commercials are historically on the
correct side of future trend changes while small specs tend
to be wrong.

S&P 500
Commercial traders have stopped their bearish trend, but no enough
to signal any meaningful reversals.

Commercials   Long      Short      Net     % Of OI
6/26/01      307,889   379,955   (72,066)   (10.48%)
7/03/01      316,543   395,410   (78,867)   (11.08%)
7/10/01      309,374   385,178   (75,804)   (10.91%)

Most bearish reading of the year: (111,956) - 3/6/01
Most bullish reading of the year: ( 41,144) - 5/1/01

Small Traders Long      Short      Net     % of OI
6/26/01      130,914     56,269   74,645     39.88%
7/03/01      133,098     54,865   78,233     41.62%
7/10/01      135,587     59,889   75,698     38.72%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01

NASDAQ-100
Institutions have decreased their net bearish position for seven
straight weeks, and small traders are about to turn net bearish.
The overall picture is still net bearish, but things are looking
up.

Commercials   Long      Short      Net     % of OI
6/26/01       26,263     35,690   ( 9,427)  (15.22%)
7/03/01       26,544     34,880   ( 8,336)  (13.57%)
7/10/01       26,688     34,640   ( 7,952)  (12.97%)

Most bearish reading of the year: (15,521) - 3/13/01
Most bullish reading of the year:  (1,825) - 1/02/01

Small Traders  Long     Short      Net     % of OI
6/26/01       10,519     6,064    4,455      26.86%
7/03/01       10,443     7,063    3,380      19.31%
7/10/01        9,073     7,486    1,587       9.58%

Most bearish reading of the year:  (1,028) - 1/02/01
Most bullish reading of the year:   8,460  - 3/13/01


DOW JONES INDUSTRIAL
Institutions have quickly reversed their position back to net
bullish.  I would like to see this trend persist for a few more
weeks before I buy it.

Commercials   Long      Short      Net     % of OI
6/26/01       11,371    12,759   (1,388)    (5.8%)
7/03/01       12,761    14,623   (1,862)    (6.8%)
7/10/01       13,743    12,999      744      2.8%

Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year:  8,925  - 5/22/01

Small Traders  Long      Short     Net     % of OI
6/26/01        4,756     6,341    (1,585)   (14.28%)
7/03/01        4,708     5,715    (1,007)   ( 9.66%)
7/10/01        5,048     7,835    (2,787)   (21.63%)

Most bearish reading of the year:  (7,572) - 5/08/01
Most bullish reading of the year:   1,909  - 1/16/01


************************Advertisement*************************
Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.

Anything else is too slow!

http://www.sungrp.com/tracking.asp?campaignid=2214
**************************************************************


PICKS WE DROPPED
****************

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

PG $68.39 -0.81 (+0.25) PG failed to display follow-through
following its breakout last Tuesday.  The fact that the stock
finished measurably lower Thursday while the Dow Jones finished
higher is cause for concern and justifies exiting the play.  The
stock just couldn't get above the $70 level Wednesday, and
gravity took hold.  Traders with open positions can use and pop
back above $69 to exit, or cut losses on a breakdown below the
10-dma at $68.05.

CSC $35.25 +0.56 (-1.03) Despite a euphoric start to the day,
the broad markets failed to retain their early gains, falling
back near unchanged by the closing bell.  CSC mirrored this
disappointing pattern, rising almost to the $36 level before
falling back to consolidate near $35 for the remainder of the
day.  Volume continues to be weak as bulls search for some
catalyst to justify bidding the stock higher.  Rather than
wait around trying to force a play, we're going to move on in
search of more lively plays.

TGH $67.11 -0.14 (-1.00) It looks like TGH has just about run
out of steam, after running to a high of $69 at the open on
Wednesday.  Since that point, the profit takers have been in
control, pushing the stock gradually lower.  The decline over
the past 2 days has dragged the Stochastics oscillator out of
overbought territory, setting the stage for more weakness in
the days ahead.  We're taking our gains and moving on to other
plays with more near-term upside potential.


PUTS:
*****

No dropped puts tonight


*************************ADVERTISEMENT*********************
Why put all your risk into one stock when you can play the
index instead?

Learn how to invest in the OEX, QQQ, and SPX.  Get intraday
market updates, plays, education and daily commentaries by
those who know.

Sign up for a two week free trial and see for yourself at
IndexSkybox.com:
http://www.sungrp.com/tracking.asp?campaignid=2202
************************************************************


FREE TRIAL READERS
******************
If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
price is 99.95 which is $20 off the monthly rate.


We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "Contact Support"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support

The Option Investor Newsletter                 Thursday 07-19-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/9640_2.asp


*************************ADVERTISEMENT*********************
Why put all your risk into one stock when you can play the
index instead?

Learn how to invest in the OEX, QQQ, and SPX.  Get intraday
market updates, plays, education and daily commentaries by
those who know.

Sign up for a two week free trial and see for yourself at
IndexSkybox.com:
http://www.IndexSkybox.com
************************************************************


********************
PLAY UPDATES - CALLS
********************

AT $63.92 +1.52 (-0.36) AT took a large dip below our closing
stop at $62 Wednesday.  But because the stock rebounded back
above our closing stop we decided to hold on for a rebound, which
materialized Thursday.  With some technical damage done to the
play, however, we do want to proceed with some caution going
forward.  From here, it may be prudent to only enter new call
positions in AT in an advancing market, only after confirming
strength in its sector by monitoring VZ, SBC, and Q.  If bullish
traders observe confirmation Friday, entries on an advance above
Thursday's intraday high at $64.20 may prove worthy.  Otherwise,
traders might wait for AT to regain its momentum next week
before entering new positions ahead of the weekend.

BBY $69.42 +0.99 (+1.25) BBY traded in accordance with our thesis
behind the play of the day Wednesday, but its rather large gap
Thursday morning made it very difficult to gain a favorable
entry point.  Nevertheless, the Retail Sector Index (RLX.X)
continues to trade well relative to the broader market and BBY
should lead any continuation of the recent advance.  That being
the case, bullish traders can confirm an advance in the RLX
above the 915 resistance level, which should allow for BBY to
breakout above $70 and allow for new entries.  However, those
traders with open positions in this play might consider using
any strength above the $70 level to book at least partial gains
in an attempt to better manage capital and risk.  After Thursday's
pop higher, we're moving stops up to the $67 level, which marks
the lower end of BBY's ascending wedge and its 10-dma.  As such,
traders who prefer entering on dips can turn to $67 for a
possible bounce should BBY pullback on light volume.

LEA $40.00 +0.05 (+0.30) LEA is on the brink of being dropped
from the call list due to the fact that the $40 level is
acting like a price magnet.  That much may be a product of
options expiration.  However, should the stock continue to
weaken ever so slightly Friday it's most likely a drop.  On
the other hand, if the stock strengthens during Friday's
session, bullish traders might look to enter new positions on
an advance above $40.50, but only in an advancing market as
measured by the S&P 500 (SPX.X).  Consider risk preferences
before looking to enter new LEA call plays.

SLVN $25.87 +0.99 (-0.52) The education services sector has
lost some of its recent momentum, which has led to light
volume pullbacks in SLVN.  For traders entering on the stock's
pullback, its rebound Thursday may have produced some profits.
For example, the stock bounced from its 10-dma at $25 Wednesday
and again Thursday.  Going forward, traders might continue to
gravitate to that level and options traders may find favorable
entries at that site.  Still, we need to see the sector start
advancing for SLVN to move higher.  Monitor others in the group
such as EDMC, CECO and COCO before entering new plays.

EFDS $22.13 +0.79 (-0.58) Patient traders got the pullback they
were waiting for yesterday as profit takers showed up to drive
EFDS down to the $21 support level, near the important 50-dma
($21.25).  The drop came on heavy volume and was followed by a
bounce at the end of the day that came on correspondingly heavy
volume.  Although buyers continued to drive the stock higher at
the open today, the $23 level provided resistance again before
the price fell back throughout the afternoon.  So we're back
where we started, waiting for either a bounce from $20-21 or a
rally through $23 before initiating new positions.  Stops should
be set at $20, as we wait for the approach of earnings on July
27th to provide more fuel for the stock.

GMST $47.13 +0.88 (+1.45) "Beware of profit taking" turned out
to be good advice, as GMST started out its life on the playlist
with a nearly $4 plunge on Wednesday.  But that was just what
aggressive traders were looking for, support near $46, the level
the stock broke above earlier this week.  The rebound was
short-lived though as the upward pressure seemed to have
completely dissipated by the end of amateur hour on Thursday,
leaving the stock ripe for profit taking.  GMST has been capped
by the $50 level for the past 3 days now, and today's "shooting
star" doji candlestick is warning of a possible trend reversal.
While we can still target new entries on a solid bounce from the
$45-46 level, make sure volume is solid.  We don't want to get
caught trying to catch a falling knife.  Perhaps the best
approach will be to wait for the breakout above $50 before
taking a position.  Keep stops set at $44.

KOPN $13.76 +1.20 (+1.35) Shining brightly in a largely
lethargic Technology market on Thursday, KOPN rocketed through
the $13 level, providing attractive entries for momentum players
as buying volume continued to increase ahead of the company's
July 26th earnings report.  This brings our play to the next
level of resistance at $14, and bullish traders will want to see
the stock push through to prove the rally still has legs.
Consider targeting new entries on intraday dips that find buyers
waiting at either $12 or $11, the new site of our stop.  Volume
will be the key to KOPN continuing higher, and if it starts to
wane, we'll want to be careful.  A continued strong-volume rally
that pushes through the $14 level can be used for new entries as
we look towards KOPN taking a run at the $17 resistance level
ahead of its earnings announcement.

LH $85.10 +0.32 (+1.12) The necessary and expected profit taking
emerged on Wednesday, dropping LH back to $84 and giving
aggressive traders an attractive entry into the play.  By
mid-morning today, the excitement of the dip and subsequent
rebound had subsided, leaving the stock to trade sideways near
$85 for the remainder of the day on very subdued volume.  It
was encouraging to see support hold as the broader markets gave
up the bulk of their intraday gains, but now we are waiting for
the catalyst to move the stock higher.  Our stop is still
resting at $83, and intraday bounces above this level continue
to provide attractive entries.  The more prudent entry may be
to wait for buying volume to pick up again, propelling the
stock through the $87 resistance level as the bulls take aim on
the $90 level.  Keep in mind that the fuse is getting short on
our play with earnings set to be released on July 23rd.


*******************
PLAY UPDATES - PUTS
*******************

MYGN $41.60 -0.65 (-6.99) MYGN continues to encounter sellers
each time it tries to advance.  This bodes very well for our
play going forward, as the stock is trading quite poorly
relative to not only the broader Nasdaq, but also the AMEX
Biotechnology Index (BTK.X).  MYGN has been propped up by the
$40 level in the last three trading sessions.  And a breakdown
below that level in the coming trading days should allow for
entry points for those who prefer directional trading.  Keep in
mind that the stock's relative low lies at $39.12, so a
decline below that level should serve as confirmation for further
downside.  But make sure the BTK is declining before entering
MYGN puts into weakness.

AES $36.68 +0.25 (-1.74) AES just can't get any respect.  After
falling through the $40 support level last week, it has been a
constant stream of red candles and today was no exception.  The
only difference today was that the stock posted a fractional
gain on the day.  Bullish traders had nothing to gloat about
though as the morning rally ran out of steam below the $38 level
(the level of our stop), declining to close near the low of the
day.  Continue to target weak intraday rallies as entry
opportunities or wait for a drop through the $36 level on
continued strong volume before adding new positions.  Time grows
short on our play with earnings set to be released on July 26th.

CIMA $61.14 -1.56 (-1.75) Gradually working lower over the past
2 days, CIMA is getting weaker in technical terms.  The key
development came with the final 2 hours of trading on Thursday,
where the stock plunged through the 200-dma and closed there for
the first time since late April.  We still have support at $60
and then $58 to deal with, but it looks like we are getting the
breakdown, although gradually, that we were waiting for.  Failed
intraday rallies have been providing attractive entry points and
should continue to do so as the company's August 2nd earnings
date approaches.  And of course, a drop through the $60 level
with the conviction of heavy volume will make for attractive
entries as well. Solid resistance is sitting at $65, making it
a great place to locate our stop

PDII $69.99 -0.01 (-5.96) Is that a bottom forming, or are the
bears just taking a break before continuing their selling party?
Apparently traders couldn't decide which way to push stocks on
Thursday, and PDII finished virtually unchanged for the day.
Intraday support is still sitting at $68, and we need to see a
strong-volume drop through this level before we can be sure that
the bears are still in control.  While that will provide
attractive entry points, even better opportunities will present
themselves on a failed intraday rally near the $75 resistance
level.  Keep stops set at $76 as a move above this level will
tip the scales in favor of the bulls and have us moving to the
sidelines.

SRNA $21.08 -0.41 (-4.86) Continuing its stair-step pattern
lower, SRNA gave bearish traders another entry point this
morning.  Starting with a gap-up open thanks to broad market
strength, the rollover began almost immediately with the stock
failing to hold above the $23 level and declining steadily into
the close.  The $21 level has been acting as a price magnet
over the past 3 days, and a drop through that level should
provide fresh entry opportunities for the next leg down.  Of
course, as long as the Software index (GSO.X) is unable to shake
off the blues, SRNA should keep giving us aggressive entry
opportunities on failed intraday rallies.  Keep stops set at
$25.


************************Advertisement*************************
Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.

Anything else is too slow!

http://www.sungrp.com/tracking.asp?campaignid=2215
**************************************************************


*************
NEW CALL PLAY
*************

MOT - Motorola $19.14 +1.56 (+1.55 this week)

Motorola provides integrated communications solutions and
embedded electronic solutions.  The company's solutions include
software enhanced wireless telephone, two-way radio and
messaging products and systems, as well as networking and Internet
access products, for consumers, network operators and
commercial, government and industrial customers.

Don't discount Motorola.  At least that's what its chief suggested
in the company's earnings report about a week ago.  Since that
time, the stock has steadily worked higher with and without the
broader market.  The company's officials hinted towards a recovery
next year during in their guidance last week, which has been the
catalyst behind the stock's advance.  The move was furthered
Thursday after Nokia said some good things about the handset
business.  That boost helped MOT past its 200-dma Thursday - MOT
hasn't traded above its moving average since May of 2000.
Further, the stock broke well above its triple top resistance at
$18 and its double top resistance around $18.50.  With an
advancing Nasdaq, MOT could make its way to $20 in the short
term.  While only $1 away, a $1 move in a stock trading under $20
with little in the way of premium equates to a large move in its
options.  Therefore, short-term traders can use the $20 level, or
thereabout, for an initial target point.  However, the stock's
current bullish price objective sits around $25.  So those who
favor holding positions longer may wait for an advance up to
the mid-$20's before exiting.  As for entry points, an advancing
Nasdaq may offer entries at current levels for bullish traders.
But a more favorable entry strategy may be to wait for a light
volume pullback down to one of MOT's support levels, starting at
$18.50, $18 or lower around $17.50 - we're starting with stops
in place at $17.  Entering on a pullback in this case may offer
for a better risk/reward dynamic in light of MOT's potential.

BUY CALL AUG-17.5*MOT-HT OI=12126 at $2.20 SL=1.00
BUY CALL AUG-20.0 MOT-HD OI= 5107 at $0.80 SL=0.25
BUY CALL OCT-17.5 MOT-JT OI=10872 at $3.20 SL=1.50
BUY CALL OCT-20.0 MOT-JD OI=17037 at $1.80 SL=1.00

Average Daily Volume = 10.5 mln



************
NEW PUT PLAY
************

GILD - Gilead Sciences $53.03 -1.37 (-3.60 this week)

Gilead Sciences is dedicated to providing accelerated
solutions for patients and the people who care for them.  The
evolution of Gilead - from a promising biopharmaceutical
company to a leader in the international development and
commercialization of medicines for infectious diseases and
oncology - is testament to what the company has achieved
through disciplined science, visionary thinking and diversified
planning.

The Biotech Index (BTK.X) and its blues are weighing on shares
of GILD.  The stock has fallen into a descending trend and
looks poised to rollover from current levels.  The broader
biotech sector has been pressured recently by the debate over
its valuation and reluctance on the part of the Federal
Drug Administration (FDA) to grant approval on various drugs
under development.  This overriding theme may continue to
push the stocks in the biotech group lower over the short
term.  The reason we're attracted to GILD is because it
currently represents a favorable risk/reward dynamic to the
downside.  The stock is clearly in a downtrend, on both its
point & figure and bar charts.  The stock is positioned at
the higher end of its channel and should see further downside
if the BTK continues to weaken.  The rollover in the BTK
Thursday strengthens the case for further downside, which
came even though the Nasdaq Composite finished higher.
However, GILD does announce earnings on Thursday, July 26th.
So it will be a short lived play.  But we're looking for the
stock to weaken in a short period of time.  Bearish traders
should look for weakness in the BTK early Friday morning
and consider entry at current levels if that weakness is
found.  Alternatively, a rollover near resistance around $55
or $56.50 would offer entries - the latter is the site of
our stop.  On the downside, target the $50 for an exit point.

BUY PUT AUG-55 GDQ-TK OI=  83 at $5.20 SL=3.25
BUY PUT AUG-50*GDQ-TJ OI=1760 at $2.75 SL=1.50

Average Daily Volume = 1.84 mln



PDLI - Protein Design Labs $56.22 -2.88 (-7.78 this week)

Pursuing the prevention and treatment of disease through the
development of humanized monoclonal antibodies, PDLI has
fundamental patents that cover many such antibodies.  Eleven
companies have licenses under these patents for humanized
antibodies that they have developed.  PDLI has licensed certain
rights to its first humanized antibody product, Zenapax, to
Hoffman-La Roche and its affiliates, which market Zenapax for
the prevention of kidney transplant rejection.  In addition to
testing Zenapax for the treatment of autoimmune disease, the
company has several other humanized antibodies in clinical
development for autoimmune and inflammatory conditions, asthma
and cancer.

The Biotechnology index (BTK.X) found support earlier this week
at the $500 level, but it is looking like a dead-cat bounce,
with the bulls having a hard time clearing the $535 level.
Keeping in mind the approach of finding a weak stock in a weak
sector, our attention is focused on PDLI, which has continued to
deteriorate this week despite some firming in the broader
sector.  The pain really began on July 6th, when the stock fell
below the 200-dma (then at $77.52) and very quickly plummeted to
the $63 level, near the 50% retracement of the April-May gains.
Then earlier this week, PDLI resumed its fall on continued heavy
volume, coming to rest near the 61% retracement ($56.16).  Below
there, we have support at $51, $47 and then $45.  With a
descending triple-bottom breakdown on the Point and Figure
chart, the bears are clearly in control as the company's August
2nd earnings release approaches.   With the negative tone in the
broad market, it looks like easy pickings for hungry bears.
Target new entries on a failed rally below the $63 level (most
likely at the $60-61 resistance level), or wait for sellers to
push the stock below $55 before taking a position.  Place stops
at $63.

BUY PUT AUG-55*PQI-TK OI=185 at $5.20 SL=3.25
BUY PUT AUG-50 PQI-TJ OI=359 at $3.20 SL=1.50

Average Daily Volume = 1.79 mln



SGR - Shaw Group $33.47 -3.01 (-5.44 this week)

Shaw Group is a supplier of fabricated piping systems in the
U.S. and integrated piping systems and construction services
for the electric power, chemical, petrochemical, and refining
industries worldwide.  In addition to its pipe manufacturing
services, SGR provides design and engineering systems for its
customers.

Have you noticed the trend in shares of companies tied to either
the electricity generation market or the Oil Services sector
over the past 6 weeks?  Well, if you haven't, trust me when I
say it is ugly, with a capital 'U'!  The persistent downtrend
has taken SGR for a southbound ride as well, with the stock
giving up nearly half its value since late May.  Declining
demand and profits has really started to take its toll in these
markets and the sellers are out in force.  With yesterday's
bounce from the $35 support level, it looked like the buyers
might try to defend this level as they had in the latter part of
June.  But the bears were back in charge today, driving selling
volume well above the ADV and price lower by more than $3.
Daily Stochastics are buried deep in oversold territory, making
our play susceptible to an oversold bounce, but there is no
fundamental reason for it to occur.  Earnings were released just
over a week ago, and beating estimates by 2 cents barely made a
blip on the daily chart before the bears resumed their selling.
We'll target new entries as SGR falls through the $33 support
level.  There will be more substantial support at $30, followed
by $27.  More aggressive traders may want to take advantage of
intraday rallies (should they appear), entering new positions as
the stock rolls over from intraday resistance, first at $35 and
then $36.50.  Set stops at $37.

BUY PUT AUG-35*SGR-TG OI=44 at $3.40 SL=1.75
BUY PUT AUG-30 SGR-TF OI=22 at $1.10 SL=0.50

Average Daily Volume = 1.02 mln



************************Advertisement*************************
Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.

Anything else is too slow!

http://www.sungrp.com/tracking.asp?campaignid=2223
**************************************************************


*********************
PLAY OF THE DAY - PUT
*********************

SRNA - Serena Software $21.08 -0.41 (-4.86 this week)

Serena Software is a provider of eBusiness software change
management (SCM) solutions.  The company's products and
services are used to manage and control software change for
organizations whose business operations are dependent on
managing information technology (IT).  SRNA's product
offerings support the industry standard IBM mainframe
platforms, including MVS, and are marketed under the brand
name Full Cycle mainframe.  This product suite automates the
software application life cycle and creates an IT environment
that facilitates concurrent development efforts by separate
programming teams, improves process consistency, enhances
software integrity and protects valuable software assets.

Most Recent Write-Up

Continuing its stair-step pattern lower, SRNA gave bearish
traders another entry point this morning.  Starting with a
gap-up open thanks to broad market strength, the rollover
began almost immediately with the stock failing to hold
above the $23 level and declining steadily into the close.
The $21 level has been acting as a price magnet over the past
3 days, and a drop through that level should provide fresh
entry opportunities for the next leg down.  Of course, as
long as the Software index (GSO.X) is unable to shake off the
blues, SRNA should keep giving us aggressive entry
opportunities on failed intraday rallies.  Keep stops set at
$25.

Comments

The software sector should see broad selling Friday morning.
It should allow for favorable trading in SRNA.  The stock
has been propped up by the $21 level this week, and could trade
below there Friday morning.  Those looking for more confirmation
might wait for weakness below the $20 level before entering new
put positions.

BUY PUT AUG-22.5*NHU-TX OI=255 at $3.70 SL=2.00
BUY PUT AUG-20.0 NHU-TD OI=204 at $2.40 SL=1.25

Average Daily Volume = 697 K



*************************ADVERTISEMENT*********************
Why put all your risk into one stock when you can play the
index instead?

Learn how to invest in the OEX, QQQ, and SPX.  Get intraday
market updates, plays, education and daily commentaries by
those who know.

Sign up for a two week free trial and see for yourself at
IndexSkybox.com:
http://www.sungrp.com/tracking.asp?campaignid=2203
************************************************************


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives